Accounting has a reputation for being an uninteresting subject in the business world. If you’re a business owner, chances are you’d definitely rather talk about your products and services than your accounting debits and credits – unless you work in accounting that is. You’ve kept a careful eye on expenses as a business owner, knowing it’s your job to keep costs as low as possible.
You may have even done your own bookkeeping in QuickBooks or peeked over your bookkeeper’s shoulder to keep an eye on the finances. Why? Because wise business owners understand that precise and timely accounting is not just a necessary evil, but also critical to your company’s survival.
However, as the company grows, most owners discover that their time is better spent on other activities. Focusing on growing the main business rather than managing day-to-day bookkeeping is a better use of time.
Accounting beyond bookkeeping
When a business owner can no longer be involved directly in every part of the company, then the company requires more than just bookkeeping. Billing, collections, payroll, deposits, sales taxes, bank account reconciliation, and basic financial statements are the only skills most bookkeepers have.
As a business grows, a bookkeeper can no longer provide what a business owner really needs: management accounting. For a growing business, financial and managerial reports are required. Basic financial reporting is required for compliance and to ensure that your books are up to date. Management reporting is used to support real-time data and key performance indicators in making business decisions.
When a bookkeeper is no longer adequate and management accounting is required, you have reached a stage in the lifespan of a small business or nonprofit organisation where accounting becomes a more fascinating topic of conversation.
How do you know you’re ready for outsourced accounting management?
Once you have reached the point where you have outgrown bookkeeping, that is when you know you need to outsource your accounting management. Other checklists to tick off and know when your company is ready to outsource include:
- Hitting $1 million in sales
- Having a staff of 8 to 10 persons
- Receiving funding from outside investors
- The CEO cannot be active in every part of the company any longer
- The business lifecycle has progressed to the stage of fast growth
- Needing more than just billing and collections out of QuickBooks
- Requiring technology systems to interact and communicate with one another
- Increased sophistication of financial reporting required for data-driven decision-making
Business owners with a ‘getting better’ mindset who are dissatisfied with the status quo regard accounting outsourcing as a tool to quickly advance to management accounting. They perceive outsourcing as a competitive advantage that enables them to be the best in class without making any upfront time or financial investments.
The psychographics of small business owners born in the Millennial Generation are also likely to favour outsourcing. They feel outsourcing offers a strategic benefit and a favourable influence on people, their most valuable corporate asset because they grew up surrounded by technology.
Conclusion
When these checklists have all been ticked off in your small business or organisation, you’re probably ready to extend beyond a bookkeeper to your accounting department. You, as the CEO or executive director, must decide how to proceed with the accounting function during these important stressful times. There are various options to consider, each with its own cost-benefit analysis.
Here at Peter Leow Consulting, we aspire to help you make your business growth as smooth and stress-free as possible. Should you need more information about our outsourced accounting management services, please feel free to contact us here.
